Understanding your current customer base is key to driving customer acquisition and business longevity. Otherwise all you are doing is producing your product and crossing your fingers that a market for your product finds you. This strategy may work in the short-term but does not protect your organisation against shrewd competitors, changing consumer tastes and evolving technologies. Performing customer segmentation analysis can help you understand your customers in order to achieve your business objectives in the following ways:
#1 – Customer segmentation analysis provides an accurate description of who your customers are so you can identify them in the wider market and target them better.
Customer segmentation analysis draws a clear picture of who your customers are in relation to demographics, psychographics, their attitudes towards your product category, their perception of your brand against your competitors, their triggers to purchase, their barriers to purchase, the sources of information they go to during their path to purchase, and the media they consume for effective reach. Once you have identified your key customer segments it is possible to overlay this information over the market population to identify and target hot prospects and customise your messaging according to their triggers and barriers to purchase, their expectations on your product category and the information sources they use on their path to purchase. This scientific approach is particularly useful for products with complex or lengthy paths to purchase, or business models which primarily rely on sales volume for business sustainability.
#2 – Your marketing strategy can be optimised to more effectively target high-quality lead segments and promote your product’s benefits according to product attributes important to these segments.
Customer segmentation analysis allows you to understand your brand position against your competitors and key brand image attributes. Once your key customer segments have been identified you can create brand perceptual maps to understand which customer segments have a stronger affinity with your brand relative to competing brands. These segments represent the ‘low-hanging fruit.’ You can also identify which brand image attributes drive sales conversion for each segment. For example, in the new car-buying market, one segment may base their purchase decision on a brand’s safety features and record, while another segment may favour brands incorporating advanced technology, and another segment may opt for cheaper brands that are fuel-efficient. This information allows you to promote your brand’s features and benefits relative to the attributes the segments you are targeting find important in their purchase decision.
#3 – You can effectively counter any messaging from your key competitors.
Customer segmentation analysis helps you identify the competitors who pose the biggest threat to achieving your business targets. These competitors may offer better or similar quality, value, accessibility, convenience, etc. so it becomes important to understand what differentiates your brand from your strongest competitors and communicate these positive points of differentiation to your key target segments. For example, if you are a retail bank where your competitors typically offer similar products and rates, it is necessarily to emphasise points of differentiation such as customer service, branch accessibility, ease of online banking, etc. to stand out from the crowd.
#4 – You can optimise your communications plan by investing in media your key segments consume, thereby reducing advertising wastage.
Customer segmentation analysis helps you identify the key communication vehicles your customers access during their path to purchase. If your customers mainly seek information on your product category through online platforms such as company websites, comparison sites, weblogs or product category forums, then supporting an advertising campaign led by TV or Print will not be the most effective nor cost-efficient strategy.
#5 – You can extend your focus beyond your primary target market to include ‘satellite’ target segments.
Customer segmentation analysis can help you identify other potential markets outside of your primary target market. For example, you may be primarily targeting one segment but your brand perceptual maps may reveal are other segments which also find your brand or product appealing but for reasons different to those of your primary target market. These ‘satellite’ target segments would exhibit different demographics, psychographics, triggers to purchase, barriers to purchase, and may use different sources of information and consume different media during their path to purchase.
#6 – You can drive product innovation through the creation of new products based on any needs gaps amongst your customer segments.
Customer segmentation analysis provides comprehensive insight into the lifestyles of your customer segments and how products in your category integrate into their lives. Opportunities for new products may arise through identifying any gaps in the market not currently satisfied by existing brands in the market.
#7 – Your brand and product portfolio can maintain relevance in the market.
Customer segmentation analysis ensures your current product portfolio does not suffer from obsolescence and maintains relevance in the market. By performing customer segmentation analysis on a regular basis, you will be kept informed of any developments in the market and changing consumer tastes which may detrimentally impact on your business’ sustainability, and formulate strategies to mitigate the negative impact of these market or consumer changes.
Customer segmentation analysis employs a scientific approach to understanding your customers to drive business growth and sustainability. If you wish to know more about customer segmentation analysis, please feel free to contact Clare by emailing ClareF@thriveplus.com.au